The $300 House: The Marketing Challenge

Editor’s note: This post is one in an occasional series on Vijay Govindarajan’s and Christian Sarkar’s idea to create a scalable housing solution for the world’s poor. Each post will examine the challenge from a different perspective, including design, technology, urban planning and more. Today, Seth Godin examines the challenge of marketing to the world’s poor.

Triple the U.S. population by three. That’s how many people around the world live on about a dollar a day. Triple it again and now you have the number that lives on $2. About forty percent of the world lives on $2 or less a day.

What’s that like? It’s almost impossible for most of us to imagine. I mean, $2 is the rent on your apartment for about 45 minutes. It buys you one bite of lunch at a local restaurant. And yet, two billion people survive on that sort of income.

The key word is ‘survive’. Subsistence income means that every penny is needed, is spent. It means you are on the edge at all times. It makes life itself an emergency. If every single thing goes perfectly, then you and your family will go to sleep tonight healthy, not too hungry and fairly safe. But of course, every single thing almost never goes perfectly. If you are bitten by a malaria-carrying mosquito, you need to buy medicine and so there’s no money for food. If you need more water, you have to spend two hours walking to and from the nearest half-decent water spot, and those two hours are the two hours you were going to spend harvesting the food your kids need.

When someone in poverty buys a device that improves productivity, the device pays for itself (if it didn’t, they wouldn’t buy it.) So a drip irrigation system, for example, may pay off by creating two or three harvests a year instead of one.

What does that do for the family that buys it? Well, if you have one harvest a year and you’re living at subsistence, it means your income is zero, or probably just a little below. If you can irrigate and get two or three harvests a year, though, your income goes up by infinity. Now, instead of making -1 penny a day, you’re making 100 or 200 pennies a day. That’s a surplus of $700 a year. That’s enough to participate in other productivity or life-enhancing investments, like a well, or a roof, or health care. It puts the edge much further away.

Into this world, we welcome the $300 House. Its success will depend on the ability to create a market for the idea. How do we do that?

Let’s start by looking at an institution which is already doing similar work, the Acumen Fund. Acumen creates these markets using patient capital. The companies that are selling solar lamps to replace kerosene ones, or water purification systems in tiny villages, or housing projects for peasants in Pakistan, or even ambulance services in Mumbai, fully intend to make a profit, but the venture capitalists on Sand Hill Road aren’t in a hurry to invest in them, since they seem a little too risky and unproven, and take a little too long to bear fruit for VC’s taste.

So Acumen finds entrepreneurs on site in the developing world, funds them, teaches them and pushes them to build really big organizations. A to Z textile mills employs thousands in their modern factory creating malaria bed nets in Tanzania. And so it grows.

Any entrepreneur or marketer can learn a lesson from how new systems create new markets, and how an infinite increase in income or productivity can change everything. Everything.

Now, here’s the kicker: If you’re a tenth-generation subsistence farmer, your point of view, about risk, about life, is different from someone working in an R&D lab in Palo Alto. The Moral Economy of the Peasant makes this argument clearly: Imagine standing in water up to your chin. The only thing you’re prepared to focus on is whether or not the water is going to rise four more inches. Your penchant for risk is close to zero. One mistake and the game is over.

As a result, it’s extremely difficult to sell innovation to this consumer. The line around the block to get into the Apple store for a gadget is an insane concept in this community. A promise from a marketer is meaningless, because the marketer isn’t part of the town, the marketer will move away, the marketer is, of course, a liar.

Let me add one more easily overlooked point: Western-style consumers have been taught from birth the power of the package. We see the new Nano or the new Porsche or the new convertible note on a venture deal and we can easily do the math: [new thing] + [me] = [happier]. We’ve been taught that an object can make our lives better, that a purchase can make us happier, that the color of the Tiffany’s box or the ringing of a phone might/will bring us joy.

That’s just not true for someone who hasn’t bought a new kind consumer good in a year or two or three or maybe ever. As a result, stores in the developing world tend to be stocked with the classic, the tried and true, because people buy refills of previous purchases, not the new. You can’t simply put something new in front of a person in this market and expect them to buy it, no matter how great, no matter how well packaged, no matter how well sold.

So you see the paradox. A new product and approach and innovation could dramatically improve the life and income of a billion people, but those people have been conditioned to ignore the very tools that are a reflex of marketers that might sell it to them. Fear of loss is greater than fear of gain. Advertising is inefficient and ineffective. And the worldview of the shopper is that they’re not a shopper. They’re in search of refills. They are in water up to their chins.

So how can the $300 House be marketed effectively? The answer is in connecting and leading Tribes. It lies in engaging directly and experientially with individuals, not getting distribution in front of markets. Figure out how to use direct selling in just one village, and then do it in ten, and then in a hundred. The broad, mass market approach of a Western marketer is foolish because there is no mass market in places where villages are the market. It has worked with other products. It can work with the $300 House.

This gentleman is a swami, a leader in his village. He owns a d.light solar lantern. He could fit all his worldly positions into a rollaboard, and yet he owns a solar lantern, the first man in his village to buy one.

Why he bought it — he liked the way it felt to be seen as a leader, to go first, to do an experiment, or his followers contributed enough that the purchase didn’t feel risky, or the person he bought it from was a friend or was somehow trusted — is less important than the fact that he is a rare individual for doing this.

After he got the lantern, he set it up in front of his house. Every night for six months, his followers would meet on his front yard to talk, to connect and yes, to wonder how long it would be before the lantern would burn out. Six months later, the jury is still out.

One day, months or years from now, the lantern will be seen as obvious and trusted and a safe purchase. But it won’t happen as fast as it would happen in Buffalo or Paris.

The imperative is simple: find the early adopters, embrace them, adore them, support them, don’t go away, don’t let them down. And then be patient, yet persistent. Mass market acceptance is rare. Viral connections based on experience are the only reliable way to spread new ideas in communities that aren’t traditionally focused on the cult of the new.

This raises the bar for customer service and exceptional longevity, value and design. It means that the only way to successfully engage this market is with relentless focus on the conversations that tribe leaders and early adopters choose to have with their peers. All the tools of the Western mass market are useless here.

Just because it is going to take longer than it should doesn’t mean we should walk away. There are big opportunities here, for all of us. It’s going to take some time, but it’s worth it. And failure, as Ted Turner might say, is just what we do as we learn to win.

Seth Godin has written twelve bestsellers that have been translated into more than thirty languages. He writes about the post-industrial revolution, the way ideas spread, marketing, quitting, leadership and most of all, changing everything.

Seth Godin has written twelve bestsellers that have been translated into more than thirty languages. He writes about the post-industrial revolution, the way ideas spread, marketing, quitting, leadership and most of all, changing everything.